I’m pleased to see former Federal Treasurer Peter Costello backs retailers’ call to lower online GST threshold. There is the obvious level playing field argument that Costello makes. Also, with Federal and State Governments facing big challenges in repairing their budgets, it’s important to defend current revenue sources, particularly relatively efficient taxes such as the GST. The strong growth in online purchases has meant that a large amount of GST revenue has been forgone, revenue that would have otherwise gone to State Governments. To reduce this forgone revenue, the Federal Government should lower the $1,000 GST-free threshold that applies to items coming into Australia, a threshold that means a lot of online purchases don’t have any GST applied.

Of course, the Government will need to consider the additional administration costs of applying GST to a larger number of items, and it’s possible that the optimal threshold may be several hundreds of dollars, but the Federal Government (Customs Service in conjunction with the Treasury) would be best placed to undertake the required analysis.